Smedvig ordered to pay NOK 509 million on Balder dispute

Norway’s longest and most expensive court case ever finally came to an end late August, when Esso Norge AS agreed to accept compensation for a faulty production vessel.
     The five-year case revolved around the production vessel Balder, which was built by Singapore’s offshore marine giant Keppel FELS Ltd. for Smedvig under a contract signed in 1994.
     Esso bought the vessel from Smedvig, but cancelled the contract shortly after, as it claimed the vessel had too many faults and shortcomings.
     The cancellation prompted Smedvig to sue Esso in 1998, demanding a compensation of NOK 2.6 billion. Esso then filed a counter demand for NOK 2.735 billion and the case landed in a Stavanger court.
     Smedvig was on July 30 this year ordered by the Norwegian court to pay Esso NOK 509 million in damages plus interest of an estimated NOK 150 million, since the latter didn’t get the workable ship it had relied on.
     In turn, Esso Exploration and Production Norway AS was been ordered to pay Smedvig NOK 23 million, while both parties must pay their own costs related to the court proceedings.
     “We are disappointed with the court’s decision and must conclude that we did not succeed in convincing the Stavanger District Court of our view,” said Smedvig’s CEO Kjell E Jacobsen.
     Smedvig said in a press release dated Aug 26 that it would accept the verdict. Esso signalled a few days later that it wouldn’t appeal further.
     The case, with legal fees, has cost Smedvig around NOK 1 billion. The company said in an earlier statement that it would seek redress from Keppel FELS, the shipyard in Singapore that built the troubled vessel.
     “Any claims for damages Smedvig is instructed to pay Esso in a final ruling, will be claimed from the yard and under relevant insurance coverage.”
     Keppel FELS is not a party to this lawsuit. Its parent company Keppel Corp., Ltd. however said on July 31 that KFELS’ liability (if any) to Smedvig in relation to warranty works, if established, would be limited to about USD 44.25 million. It also said warranty and other insurances are in place to cover the potential liability.

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